Google's Future Awaits Judge's Ruling

Wall Street Journal

a day ago

U.S. District Judge Amit Mehta holds in his hands the fate of Google's massive search-engine business, which last year he ruled was an illegal monopoly.
But OpenAI and other competitors might be fracturing that business faster than any judge could.
A key focal point of the trial dealt with how new AI players appear to have already begun to whittle away at the search engine, the primary portal to online knowledge and discovery for decades.
Mehta on Friday will hear closing arguments from lawyers at the Justice Department and Google over how to improve competition in online searches, though his ruling is also expected to play an outsize role in the future of AI.
The Justice Department, which brought the case against Google in 2020, has proposed forcing the sale of its Chrome browser, preventing Google from being able to pay Apple to be its default search engine and requiring it to share data with competitors.
The department says the uncommonly harsh remedies are supported by a legal standard created when the U.S. government tried to break up Microsoft over 20 years ago.
'All three of the DOJ's major remedies are aimed at helping generative AI providers take share from Google,' said Paul Gallant, a policy analyst for TD Cowen.
Mehta has said he expects to issue a ruling in August.
Google's attorneys plan to argue that the government's proposals are overreaching, with the potential to cause disproportionate harm to the company's business. The company, which has a roughly 90% market share of online searches, has proposed a narrower set of remedies that would modify its search agreements with Apple, as well as Mozilla and Android, to allow for more competition. It has said it would appeal the judge's ruling.
Google has paid Apple $20 billion a year in exchange for placement as the default search engine within its Safari web browser. The case has the potential to wipe out billions of annual profit from Apple's bottom line.
Mehta is considering restricting Google from sharing revenue with Apple as part of its existing agreement, potentially changing the way Google is embedded within Safari. Analysts and legal experts say his decision could affect future agreements between Apple, Google and a host of other companies dealing with how AI options are presented within dominant platforms.
The search giant is now paying Samsung and Motorola to pre-install Gemini on devices, according to court testimony. The department says this represents an effort to monopolize the next generation of internet search and should be prohibited by the court.
Alphabet GOOGL -0.29%decrease; red down pointing triangle shares slid sharply this month after an Apple executive testified in federal court that Google searches in Safari had recently fallen for the first time in two decades. He also said Apple would likely offer AI options such as ChatGPT or Perplexity in Safari within the next year.
Google said in a blog post that it has seen an increase in total searches coming from Apple devices and platforms.
'A formidable question that hovers over the entire proceeding is how should the judge take account of emerging developments and the technology that affect the fortunes of all of these companies,' said William Kovacic, an antitrust law professor at George Washington University and former chairman of the Federal Trade Commission.
Sundar Pichai, CEO of Google parent Alphabet, testified that Google hopes to enter into a distribution agreement with Apple by the middle of this year that would enable the iPhone-maker to tap Google's own AI model and chatbot, called Gemini, in responding to user queries. Apple already offers that option with OpenAI's ChatGPT.
Google last week announced the U.S. rollout of 'AI Mode,' which answers search queries in a chatbot-style conversation without the standard list of blue links. The change is the most significant overhaul of the search engine in years as Google moves to compete more directly with a host of AI upstarts.
Google has been honing the capabilities of Gemini, which is the force behind AI Mode as well as other AI features embedded in many of its products. Gemini has seen its user base grow in recent months, but it still lags behind ChatGPT in popularity.
Write to Katherine Blunt at [e-mail] and Dave Michaels at [e-mail]